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[grupo] 19/8/2018 08:03

August 19 2018 01:57 AM
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LNG spot prices in Northeast Asia are averaging the highest since 2014
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Bloomberg/Tokyo

Some of the world’s biggest buyers of liquefied natural gas are signing mid-term supply deals, a move seen as protection against a further rise in prices that are already at the highest in four years.
A unit of BP signed a three-year supply agreement with Exxon Mobil Corp’s Papua New Guinea LNG project on Friday, following a similar deal by PetroChina International last month. Japan’s Jera Co, one of the world’s biggest buyers of gas, inked an agreement for the same duration with Abu Dhabi Gas Liquefaction Co’s LNG project last week.
“Buyers have been concerned about the strength of prices this summer and coming winter and may have expectations of further increases,” Wood Mackenzie Ltd analyst Nicholas Browne said in an e-mail. “For a portfolio player like BP, it gives them additional supply and optionality close to key Asian markets over this period.”
LNG spot prices in Northeast Asia are averaging the highest since 2014 at around $9.50 per million British thermal units through the first seven months of this year, according to World Gas Intelligence. Prices last year surged on the back of China’s soaring consumption growth and this year’s rally comes before winter, when use across the region typically peaks.
Exxon Mobil is negotiating another mid-term LNG deal from the PNG LNG facility in lieu of spot sales, partner Oil Search Ltd said on Friday when it announced the deal with BP. More mid-term deals are likely at least until 2023 or 2024, when the next round of major LNG supply projects come online, according to Wood Mackenzie’s Browne.
“The uptick in demand and spot prices over the last year has brought home the risks to buyers of being exposed to the spot market too much,” said Saul Kavonic, Credit Suisse Group AG’s director of energy research in Asia. That has created “more deal space for buyers and sellers to agree on mid-term contracts.”

[grupo] 18/8/2018 22:51

Overlooked Gas Project Could Be Biggest Winner In Trade War
By Tim Daiss - Aug 18, 2018, 4:00 PM CDT Gas storage

After several months of what can only be only called bad PR and troubling news coming out of the ExxonMobil-led $19 bn Papua New Guinea (PNG) LNG project, finally some good news has broken. Project partner Oil Search, which holds a 29 percent stake, said the project had agreed to a deal to supply LNG to a unit of British oil giant BP.

The agreement will start this month and provide BP with about 450,000 tonnes of LNG per annum over an initial three-year period, then rising to about 900,000 tonnes for the following two years, Oil Search said in a statement without giving any financial details of the deal.

"(The move) takes the total contracted volumes from the project to approximately 7.5 million tonnes per annum (mtpa)," Oil Search Managing Director Peter Botten said. The agreement comes a month after Oil Search announced a similar deal with PetroChina, the publically listed arm of state-run oil major Sinopec, for 6.6 mtpa. ExxonMobil is also reportedly in negotiations with several other parties over an additional 450,000 tonnes per year of LNG supply.

These developments come after several tense months for PNG LNG project partners. On February 26, 7.5 magnitude earth quake triggered landslides and flattened buildings in the country, and left at least 100 dead, forcing the government to declare a state of emergency.

However, the fallout from the quake caused anger among many locals that either directly attributed the natural disaster to gas drilling in the mountain region of the country, or at the very least claimed it was a contributing factor. Project partners, along with geologists, disputed the claims, but to no avail. Most locals still blame the PNG project for the devastating earthquake.

That anger then spilled over into local communities complaining that the PNG project consortium had taken advantage of both federal and provincial government leaders as well as land owners when it first reached deals to build the project around ten years ago.

After minor repairs to the facility and passing safety checks, the PNG project resumed operations by mid-April but by then it had a public relations fiasco on its hands. In lock step, the PNG government joined in the fray, claiming it they had given away too much in the initial round of negotiations that allowed the project to be built, and vowed that for any future negotiations for additional projects the country will not away concessions so easily.

Then on July 5, Exxon reported that it had stopped construction on its Angore gas pipeline in the country’s strife-hit highlands after building sites were vandalized. Two weeks later, the U.S.-based oil major said that it, along with PNG security forces, were investigation the vandalism. The 11-km (7-mile) Angore pipeline is being built to connect the Angore gas field to the Hides gas conditioning plant.
Related: WTI Set For Longest Weekly Losing Streak Since 2015

However, according to reports coming out of the country highlands region rioters and landowners have not yet received payments due from the government out of royalties paid by the project which shipped its first LNG four years ago.
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All of this unrest would have been hard to imagine just a year ago when the PNG project was the envy of the LNG industry. Unlike most of Australia's massive CAPEX LNG projects that have fallen behind schedule and suffered exorbitant cost and budget blowouts, the PNG project was the envy of the industry. Not only had it been completed ahead of schedule but also delivered its first LNG ahead of schedule in 2014.

Moreover, if Exxon and its project partners can address what appears to be legitimate government and local land owner concerns, the project should be able to capitalize on the ongoing trade dispute between the U.S. and China. Chinese end LNG users told global commodities data provider S&P Global Platts last week that, if implemented, the pending Chinese tariffs would push the cost of U.S. LNG above what companies could afford for spot cargoes in the near term.

"[A] 25% [tariff] is not something we can absorb even if domestic demand is strong," said a source at a state-owned Chinese company. "So while this uncertainty persists, I doubt buyers will be buying a lot of spot US LNG."
Related: The One Oil Industry That Isn’t Under Threat

If Beijing pushes through with the 25 percent retaliatory tariff against U.S. sourced LNG, the PNG project can offload uncommitted cargoes on the spot market in Asia to replace U.S. LNG. To date, China has been a consistent customer of U.S.-based Cheniere Energy’s cargoes sold on the spot market in Asia.

PNG can capitalize on Cheniere's loss, even if PNG’s volume of uncommitted production is narrowing.

In 2017, the PNG project shipped a total of 110 LNG cargoes with 23 ending on the spot market. The total figures since the start of exports in mid-2014 have reached 370 cargoes.

Moreover, major PNG project partners, Exxon, Oil Search and French oil major Total, have been discussing expanding the project. If an expansion is agreed upon and approved by the PNG government, it will be underpinned by the more than 10 tcf of discovered undeveloped gas resource in the Elk-Antelope and P’nyang fields and potentially gas from the foundation project fields - stiff competition for both U.S.-based and Australian LNG projects.

By Tim Daiss for Oilprice.com

[bountyhunter] 18/8/2018 13:18

Interesting, I had thought that given the recent extreme weather events this year's hurricane season might be worse than average but that sounds not to be the case. It would be nice to have a 'normal' season after the heavy snowfalls followied by excessive temperatures over the last 6 months!

[sarkasm] 17/8/2018 11:38

What would a ‘no-deal’; Brexit mean for the UK oil and gas industry?

Published by David Bizley, Editor
Oilfield Technology, Friday, 17 August 2018 10:30

Professor Paul de Leeuw (Director, Robert Gordon University (RGU) Oil and Gas Institute), considers how a 'no-deal' Brexit scenario would impact the UK oil and gas sector.

The discussion around hard Brexit, soft Brexit, divorce bill, transition arrangements, new trade deals and the Chequers Brexit plan is now rapidly turning into a bewildering array of statements, claims and counter claims. The Governor of the Bank of England, Mark Carney, explained it well when he told the BBC in early August that “the possibility of a no-deal Brexit is uncomfortably high and highly undesirable.” Mr Carney also said that “if a no-deal Brexit were to happen, it could mean disruption to trade and economic activity, as well as higher prices for a period of time.”

So what is the real impact of Brexit on the UK and the UK oil and gas industry specifically? Luckily the internet provides a fount of knowledge, analysing every single dimension of the Brexit debate. However, even Siri or Alexa are somewhat challenged at the moment to provide clarity around what the possible Brexit implications could be for the offshore oil and gas sector in the UK.

To ensure a smooth and orderly Brexit process three separate, but inter-related, areas need to be addressed prior to the UK leaving the EU in March 2019. These include the ‘divorce’; settlement (to pay for some of the UK’s outstanding liabilities when we leave), the transition arrangement and a deal on the relationship after the transition period. The first two are to be addressed in the withdrawal treaty, with the longer term arrangements to be agreed thereafter.

If the UK and the EU will not be able to agree the ‘divorce’; settlement or the transition arrangement by March 2019, the UK may well be heading for a no-deal Brexit, which could create the negative economic situation as highlighted by Mr Carney on August 3rd.

The detailed debate and negotiations as part of the Brexit discussion will ultimately shape Britain’s position outside the EU. Unfortunately, the road ahead is far from clear as no country has ever withdrawn from the EU before and the process for doing so is likely to be complex and time-consuming.
So what does this all mean for the UK oil and gas industry?

Despite the many challenges the UK oil and gas industry encountered over the last few years, it has done a remarkable job increasing production between 2014 and 2018. Production from the basin increased by over 16% and it is expected that production will remain at current levels for the remainder of this decade. However, without major new investment, production is forecast to decline from early next decade onwards. Therefore it will be key to ensure ongoing investment during the Brexit transition window to safeguard production and jobs from 2020 onwards. This will require urgent clarification around the ‘rules of the game’ and possible transition arrangements so investors can be confident about continued investment in the UK oil and gas sector.

Although the UK is one of the leading oil and gas producers in the EU, the Department for Business, Energy & Industrial Strategy (BEIS) estimates that currently around 60% of the UK’s hydrocarbon requirements are met by domestic production, with the remaining satisfied through imports. Of these imports, the majority are likely to come from non-EU countries. By reverting from the current arrangements to the World Trade Organisation’s (WTO) framework in the no-deal Brexit situation, the UK could be exposed to additional tariffs on the import and movement of hydrocarbons, although this is expected to be relatively modest.

In terms of regulation and policy for the upstream oil and gas industry, the UK currently represents over 60% of all the oil production and over 30% of all the gas production in the EU. As such, the UK has been one of the leading voices in the EU with respect to oil and gas, and many of the EU directives, legislation and other industry good practices relating to oil and gas have originated or have been developed in close collaboration with the UK. Although it will take some considerable time to untangle the complex regulatory and policy frameworks, the impact for the oil and gas industry is likely to be modest. In terms of the UK oil and gas tax system, little is expected to change as a result of Brexit as the EU has no remit over the UK’s fiscal regime for the industry.

The UK has a proud heritage in exporting goods and services to other oil and gas basins around the world. The industry has also been very resilient over recent years to deal with volatility associated with oil prices, exchange rates and supply chain costs. However, this resilience could be tested again in the absence of any clear and/or new trade agreements. By moving from the current arrangements to the WTO’s framework in the no-deal Brexit situation, the supply chain could be exposed to delays in moving critical goods and services and potentially to additional tariffs, thereby increasing the industry’s cost base and risk profile.

In relation to the freedom of movement in the labour market, the Prime Minister Theresa May made it clear that the UK will withdraw from both the Single Market and from the Customs Union and will secure full control over the UK borders and therefore immigration. Oil and Gas UK, the trade body for the sector, estimates that c. 170 000 are directly and indirectly employed in the sector, of which c. 10% are non-UK citizens. With the oil and gas industry relying heavily on access to international skills and capabilities ranging from high tech industry jobs to crews on standby vessels, this may be one of the more challenging areas to be addressed.

Of course, there is a balance in the Brexit debate for the oil and gas sector. The prospect of a lower exchange against other major currencies will have the potential to stimulate export and to make the UK more attractive for foreign investment. Time will tell if the upsides outweigh the downsides, but with an industry competing for capital in the next few years, it is key that there is clarity around the ‘rules of the game’ as soon as is practical.

Successful negotiations can be characterised by having a plan, deliverables, a mandate and alternative options if the original plan doesn’t work. On the basis that some form of Brexit is inevitable, hopefully a smooth and orderly Brexit will be the outcome for the UK. If not, the offshore oil and gas industry could be in some choppier waters than necessary for the next few years, with activities and production at risk in case of a no-deal Brexit. In the latter case, maybe Siri or Alexa can help out.

Professor Paul de Leeuw

Director, Robert Gordon University (RGU) Oil and Gas Institute

Aberdeen